Retailers Face Challenges, But With Effort Comes Rewards

Challenges

The operating model for most retailers is not configured for omnichannel. Organizational boundaries exist that structurally constrain the ability to operate seamlessly across these channels. The "e-commerce team" is often a separate entity from the mainline "store ops" crew.

Merchandising, planning, forecasting, supply chain, fulfillment and marketing -- the traditional back office functions -- are infrequently aligned to support the channels in delivering a consistent customer experience. Many times these back office capabilities are channel-specific, with each channel having dedicated fulfillment capabilities and processes. They are often optimized for the unique needs of a channel (e.g., getting the right product in the right amounts to the right store versus aligning the specific needs and wants of an individual customer with the capabilities that would achieve those customer expectations).

There’s nothing inherently wrong with channel optimization. In fact optimizing key supply-chain metrics, such as inventory turns, for stores may mean millions of dollars in financial value to a retailer. But in some ways, an efficient retail store supply chain can detract from a seamless omnichannel experience.

Retailers’ systems and data -- especially customer data -- are often segregated by channel. Order management systems, inventory and product catalogs, merchandising platforms, even promotion and loyalty applications are usually distinct systems that don’t cross channels. These information technology (IT) capabilities often reflect substantial legacy investments that are difficult to extend to the omnichannel world, thus creating the need for separate solutions. Many retailers try to address this by bridging platforms together with "data feeds" and extract-transform-load (ETL) interfaces. This is workable but not ideal, and is difficult to scale.

Sometimes with customer information you encounter regulatory, statutory and privacy/ permission obstacles in enabling a full omnichannel experience. For example, a convenience retailer or grocery that manages both customer loyalty data and healthcare data, due to its onsite pharmacy or clinic, may be constrained from leveraging patient insights in promoting certain products or offerings (“I see you've got hypertension -- how about these low-sodium snacks?”). A no-no and also a little creepy.

Expectations

Customers are oblivious to the obstacles that retailers face in enabling an omnichannel experience. Even when educated on these issues, it frankly doesn't matter. As a consumer, a retailer is an entity with which I may choose to have a relationship. I expect them to know who I am, know what I like and cater to me in a way that delights me. The logo on the website and the logo hanging over the front entrance sure look the same. Seems simple.

What to Do

At the end of the day, the two things that differentiate a retailer are its customers and its "offer" -- the products and services that its customers want, available through the channel that is most convenient. Leading retailers become very good at integrating customer data, generating insights from that aggregated information, and then pointing those insights at its marketing channels (offline and online), its merchandising processes and its channel operations.

Leading retailers are working hard at integrating customer data both from first-party (internal systems) and third-party (external platforms) sources. By collecting and attributing information about a customer across the various touchpoints, a retailer can assimilate a more comprehensive view and in turn better understand customer behaviors, anticipate their needs and wants, and determine the treatment that best aligns with their expectations.

Through advanced analytical segmentation and modeling efforts, a retailer can leverage its scale through the sheer volume of customer engagements in developing its experience strategies. An omnichannel experience, driven not just by intuition and brand intent, but rather informed by customer data, analytical insight and real world validation, is a powerful and differentiating capability.

With the expansion of the digital channel for both marketing (e.g., email, search, display, paid social) and retail (e-commerce), retailers now have the added capability to test experience strategies, validate the impact of customer treatments, and then refine, tailor and scale those solutions. Digital audience platforms give a retailer an exceptionally responsive feedback loop that can be used to impact the experience in real time -- and the ultimate outcome of that experience -- the sale.

Integrating data is the starting point and frankly, the easiest to change. Integrating organizations and operating models is harder. Retail organizations need to evolve and integrate in the same way customer information and insights need to change. The modernization of a retail organization means real fundamental change with an orientation not just around channels or products, but one focused on customers. We are seeing the emergence of the chief customer officer (CCO) at many retailers, with reporting structures that finally integrate marketing, merchandising, and channel under one umbrella. Through this alignment, retailers are seeing their overall business strategy grounded by their customer strategy, and their execution in the marketplace is reflecting this alignment.

Important Opportunities

It’s not enough to be "out there" with a presence across multiple touchpoints. Customers expect an experience that is tailored to their unique needs and is consistent across channels.

The key to unlocking the promise of omnichannel is in exploiting the digital assets that contain the critical insights which drive a customer’s experience. This unlock requires integration, attribution, analytics and digital technologies to test, learn, refine and ultimately profit from omnichannel capabilities. Leading retailers are now exploiting these technologies to better engage and delight the customers they've chosen to serve.

About the Author

Mike is a seasoned executive with more than 23 years of professional services experience across a broad spectrum of disciplines including client account leadership, sales, and consulting delivery. In his role at Merkle, Mike’s focus is on articulating how Merkle’s industry-specific approach to delivering Connected CRM™ solutions is an important enabler to retailers aiming to make smarter business decisions and more effectively use customer insights.